Thousands of jobs are at risk at BHP as the mining giant announced plans to suspend its nickel operations amid global oversupply and plummeting prices.
Morningstar’s Equity Analyst-Mining Jon Mills says BHP’s attempted acquisition of Anglo American got “too expensive”.
BHP has walked away from its $74 billion takeover bid of Anglo American.
“I think, just got too expensive for them,” Mr Mills told Sky News Business Editor Ross Greenwood.
“It’s good to see actually.”
The move to halt its operation comes from an oversupply in the global nickel market stemming from Chinese-backed operations in Indonesia, according to the Australian Financial Review.
BHP’s President Australia Geraldine Slattery said the global oversupply had been too much to justify the multinational continuing its nickel operations.
BHP’s nickel operations will be suspended from October 2024 as soaring global supply has sent prices plummeting. Picture: BHP
“Like others in the Australian nickel sector, we have not been able to overcome the substantial economic challenges driven by a global oversupply of nickel,” she said.
The mining giant hopes to restart its nickel operations and will review the suspension in February 2027.
Up until then, BHP will invest about $450m each year into its nickel facilities and those within the company’s 3000-strong vertical will have the choice to either take up a role at the company or take a redundancy.
The company will also invest $20m to support communities impacted by the temporary recession.
Loading embed…
For the 2023-24 financial year, BHP is expected to report an underlying loss of US$300 million (AU$450m) within its nickel division.
Resources Minister Madeleine King described the move as “disappointing” after the Albanese government worked to prop up the nickel sector by adding it to the critical minerals list in February.
“BHP’s decision to temporarily suspend its nickel operations in Western Australia due to changing market conditions will have a substantial impact on the workers and communities of Kwinana, Kambalda and Kalgoorlie,” Ms King said.
“The decision is disappointing. It’s a hard day for workers and WA and it reflects the extreme volatility in global nickel markets.”
BHP’s announcement comes after the Albanese government added nickel to the critical minerals list in February. Picture: Richard Wainwright – Pool/Getty Images
Despite her disappointment at the suspension, the Minister welcomed BHP’s investment in its nickel facilities and its move to redeploy impacted workers amid the suspension.
Global nickel prices averaged more than US$25,000 (AU$37,000) a tonne in the 18 months from the start of 2022.
It is now at US$16,725 (AU$24,763) a tonne. This has put substantial pressure on BHP’s Nickel West operations.
Since 2020, BHP has invested more than $4.4 billion to sustain its nickel operations.